Equity incentives - strategies for challenging times

Notwithstanding ongoing economic uncertainty, employers continue to use equity incentives to retain and recruit staff. Now is a good time to revise existing arrangements, or implement new ones.

In addition, employees earning more than £150,000 now face a 50% top rate of income tax. There will also be an increase in national insurance contributions (“NICs”) from April 2011 for all employees and employers. Minimising tax and national insurance costs in relation to remuneration will therefore be an objective for many businesses and individuals in the coming years, and equity incentives, if properly structured, provide a means to achieve this.

This briefing guide looks at ways in which incentive plans can be designed or revised to take account of current market conditions, covering a wide range of subjects from how to tackle underwater options to making best use of lower market valuations in relation to HM Revenue & Customs (“HMRC”) approved share plans. The guide also explains tax and compliance issues and potential tax savings.